Yes, you are looking at a TPK. No, you don't have any good options. When you buy a stand-alone module, you can just get one at the appropriate power level for the party. When you buy a campaign, then the PCs need to be at the right level at the right time. Yes, you can rewrite the opposition… but that is (a) a lot of work which negates the value of buying a module and (b) just sets you up for trouble in the next episode. In some cases you can run a side-quest… but often the campaign has a time-line which makes taking breaks a total immersion breaker. Exactly the situation you are in. For most gaming groups, what you DON'T want to do is run the TPK. The PCs did nothing stupid or wrong, and sending them into the cave at level 1/2 is effectively a TPK-by-DM-fiat. In DND it is very hard to gauge the difficulty level of the opposition, and you really, really want players to be willing to take risks. In this scenario, there is no evidence that going into the caves at level 1/2 is suicide, and there is lots of evidence that that is what the module wants them to do. Running a bait-and-switch there (and that just after the infamous Cyanwrath encounter), is a terrible, terrible, terrible idea. TPK because the PCs did something stupid/risky is fine, and risking a TPK because the PCs did something stupid/risky is a good idea. This isn't that scenario.
I'd say level the PCs by fiat (which does break immersion, yes) and blame the writers, who did a frankly awful job. The first episode assumes that PCs will blindly charge into a town which is being aerially-patrolled by a guaranteed-TPK dragon. The second episode assumes that the PCs will blindly attempt to infiltrate an enemy camp, which sounds like a terrible, terrible idea unless you metagame-intuit that that was the right thing to do. Sure, the writers are allowed to assume a strong DM-nudge for episode 1 to get the ball rolling, but they needed to add a backup plan if the PCs didn't behave suicidally in episode 2, and they didn't, and your PCs didn't.